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Lester, Torres, and Hearst are members of Arcadia Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate

Lester, Torres, and Hearst are members of Arcadia Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate the limited liability company. The members' equity prior to liquidation and asset realization on August 1 are as follows:

Lester $18,600
Torres 43,100
Hearst 26,800
Total $88,500

In winding up operations during the month of August, noncash assets with a book value of $116,500 are sold for $144,500, and liabilities of $38,800 are satisfied. Prior to realization, Arcadia Sales has a cash balance of $10,800.

a. Prepare a statement of LLC liquidation. Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss, sale of assets) as negative numbers using a minus sign. If an amount is zero, enter "0".

Arcadia Sales, LLC
Statement of LLC Liquidation
For the Period August 1-31
Cash + Noncash Assets = Liabilities + Member Equity Lester (2/5) + Member Equity Torres (2/5) + Member Equity Hearst (1/5)
Balances before realization $ $ $ $ $ $
Sale of assets and division of gain + + + +
Balances after realization $ $ $ $ $ $
Payment of liabilities
Balances after payment of liabilities $ $ $ $ $ $
Distribution of cash to members
Final balances $ $ $ $ $ $

b. Provide the journal entry for the final cash distribution to members. For a compound transaction, if an amount box does not require an entry, leave it blank.

c. What is the role of the income- and loss-sharing ratio in liquidating a LLC?

The income- and loss-sharing ratio is only used to on the realization of asset sales. It used for the final distribution.

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